Health Net 2007 Annual Report Download - page 60

Membership in our commercial health plans decreased by 67,000 members, or 3%, at December 31, 2007
compared to December 31, 2006. This decrease was primarily attributable to the mix shift from large group to
small group/individual enrollment resulting in net loss of 26,000 commercial risk members and a 41,000 ASO
member loss. This mix shift was predominantly seen in our California plan, which experienced a decline of
73,000 large group members primarily from a loss of two large accounts, partially offset by a net gain of 58,000
small group and individual members. Our Northeast plans experienced a decline of 37,000 members in the large
group market, which was partially offset by a net gain of 16,000 members in our New York small group market.
As a result of our targeted mix shift, our small group and individual enrollment comprised approximately 35% of
our commercial risk enrollment, excluding ASO, at December 31, 2007, up from 31% at December 31, 2006.
Membership in our Medicare Advantage program increased by 37,000 members at December 31, 2007
compared to December 31, 2006, due to membership growth primarily in Arizona and Connecticut. Our stand-
alone Medicare PDP membership increased by 79,000 members at December 31, 2007 compared to
December 31, 2006.
In January 2008, we were directed by the CMS to temporarily cease the sale of our stand-alone PDP
products due to certain administrative deficiencies relating to our ability to timely process stand-alone PDP
enrollment applications. We do not believe that this temporary suspension will have a material adverse effect on
our Medicare business.
We participate in state Medicaid programs in California, Connecticut and New Jersey. California
membership, where the program is known as Medi-Cal, comprised 84% and 85% of our Medicaid membership at
December 31, 2007 and 2006, respectively. Membership in our Medicaid programs increased by 6,000 members
at December 31, 2007 compared to December 31, 2006, primarily due to enrollment increases in Connecticut. In
the Connecticut Medicaid program, we came to an agreement with the State of Connecticut where we will
continue to serve approximately 90,000 members on an ASO basis through at least February 29, 2008, though we
and the State of Connecticut may mutually agree to extend the arrangement. We expect to exit the Connecticut
Medicaid program entirely by the end of the first quarter of 2008. See “Item 1. Business—Recent Developments
and Other Company Information—Withdrawal from Connecticut Medicaid Program” for additional information.
December 31, 2006 Compared to December 31, 2005
Total health plan membership increased by 9% to 3.7 million members at December 31, 2006 from
3.4 million members at December 31, 2005. The increase was driven by the addition of 300,000 Medicare Part D
members and 83,000 members from the Universal Care acquisition. Consistent with our strategy of growing our
small group and mid-market segments, our small group and individual enrollment increased by 33,000 members
in 2006, or 5%, as compared to 2005. Membership in our large group declined by 45,000 members, or 3%, from
2005 to 2006. At December 31, 2006, approximately 30% of our commercial enrollment, including ASO, was in
the small group and individual segments, up from 28% for the same period in 2005.
Membership in our commercial health plans decreased by 1% at December 31, 2006 compared to
December 31, 2005. This decrease was primarily attributable to continued impact of premium pricing discipline
and competition, particularly in the Northeast. The enrollment decline was primarily seen in our Northeast plans,
which had a lapse rate of approximately 21%. This enrollment decline was partially offset by an increase in our
small group and individual enrollment in California.
Membership in our Medicare Risk program, excluding members under Medicare Part D, increased by
25,000 members at December 31, 2006 compared to December 31, 2005, due to membership growth primarily in
California from the addition of two new counties. Under Medicare Part D, which became effective on January 1,
2006, we added 300,000 members.
Membership in our Medicaid programs increased by 10,000 members at December 31, 2006 compared to
December 31, 2005, primarily due to enrollment increases in Healthy Families and Healthy Kids programs in
California.
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